Health law lifts incomes for low- and moderate-income Americans

Provisions of the Affordable Care Act not only make health insurance more affordable for low- and moderate-income Americans. They also help improve the economic well being of Americans with modest incomes, according to a new report by the Brookings Institution.

"The Effects of the Affordable Care Act on Income Inequality" estimates that the lowest 20 percent of U.S. earners will see their incomes increase nearly 6 percent on average when their subsidized health insurance is calculated as wages. But the law also causes incomes to decline slightly, on average, for the rest of Americans.

The findings aren't surprising, according to the report by Brookings' Henry J. Aaron and Gary Burtless, both senior fellows for economic studies. The health law provides tax credits to help working families pay for coverage and increases income eligibility for Medicaid, the federal/state health program for the low-income Americans.

"Because Medicaid is (free) to the low-income population and since the refundable tax credits will be restricted to families with incomes below 400% of the poverty line, the great majority of the beneficiaries of the new government spending will be in the bottom half of the income distribution. Our estimates suggest, in fact, that the overwhelming majority will be in the bottom one-third of the distribution," the authors wrote.

Measures that help pay for the tax credits and Medicaid expansion - like cutting provider reimbursements to Medicare Advantage plans, higher Medicare payroll taxes and increased premiums for high-income Medicare enrollees - contribute to "small proportional drops in income for Americans in the top three-quarters of the income distribution which offset the larger proportional gains obtained by Americans in the bottom quarter of the distribution," the authors wrote.